Rent JE & T accounts

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    Topic
  • #193034
    CPA – Hopeful
    Participant

    could someone show me the JE and T accounts to use to solve this problem. I keep getting it wrong and the answer doesn’t show them. I think If I see them it will help.

    Thanks!

    On July 1, 20X0, Gee, Inc., leased a delivery truck from Marr Corp. under a 3-year operating lease. Total rent for the term of the lease will be $36,000, payable as follows:

    12 months at $ 500 = $ 6,000

    12 months at $ 750 = 9,000

    12 months at $1,750 = 21,000

    All payments were made when due. In Marr’s June 30, 20X2, balance sheet, the accrued rent receivable should be reported as:

Viewing 5 replies - 1 through 5 (of 5 total)
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  • #660743
    sdguy
    Participant

    Hi CPA-Hopeful. I can certainly help you with Journal Entries, but really the complex part here is figuring out what has been paid, and what is still owed. The difference is your accrual. $9000 is the answer.

    For myself, I would do a quick spreadsheet, since I'm very visual and like to see it laid out. Basically:

    1.) Between between July 1 2000 and June 30 2002, 24 payments have been received, totaling $15000 (500 x 12, 750 x 12).

    2.) But in GAAP accounting, we have to take the total lease rental amount and straight line it over the lease term. So $36,000 / 36 months = $1000 a month is what is EARNED.

    So at month 24, we have EARNED $24,000 (24 months x $1000/mo)

    Conclusion: If we've earned $24K, but received only $15K, we're still owed and should accrue for $9K.

    (24K – 15K = 9K).

    Let me know if this makes sense. In the real world, you would be booking a journal entry EACH month to accrue – so 36 journal entries total. But for illustration purposes, the net effect of the JE in month 24 (assuming you didn't book any JE's months 1-23) would be:

    Dr Cash $15,000

    Dr Accrued Rent Receivable $9,000

    …………………………………….Cr Rental Income $24,000

    AUD: 83
    FAR: 77
    REG: 86
    BEC: 86

    #660744
    CPA – Hopeful
    Participant

    Thanks. I could get the right answer but when I was trying to do the JE I was trying to do the entire 36000.00 and was getting stuck! Thanks. Are you from South Dakota?

    #660745
    sdguy
    Participant

    No problem. San Diego CA actually. What about you?

    AUD: 83
    FAR: 77
    REG: 86
    BEC: 86

    #660746
    CPA – Hopeful
    Participant

    South Dakota! Thanks for the help

    #660747
    sdguy
    Participant

    Anytime!

    AUD: 83
    FAR: 77
    REG: 86
    BEC: 86

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